Wednesday, November 7, 2012

Scary Halloween Time

Mogambo
Guru

Scary
Halloween Time

The horror of our economic situation is, for some weird reason,
made even more terrifying on Halloween, when the little darlings from the
neighborhood come to the door with their annual "Trick or Treat"
tomfoolery, knowing that it is going to cost me money.

I find that I can no longer frighten them away by popping up
with the usual scary masks, fangs, fake blood, or even screaming at them at the
top of my lungs, my face bent down to theirs, nose to nose, "You're going
to die!Die!You and your parents will die horrible,
painful, lingering deaths because the evil Federal Reserve is creating so much
money that it will cause so much inflation in prices that you will all starve
to death! Have some candy! Happy Halloween!"

This year, I decided that I was becoming stale.That is why, this year, I greeted them by
saying "Happy Halloween! Have some candy!Eat up! Enjoy it while you can, kids, and eat all this yummy candy to
make yourself fat and sweet because your parents will soon have to kill you,
probably while you are sleeping, and then use big, sharp knives to cut out your
bones and organs to sell on the black market, and then cut up what's left of
you into little pieces before they cook you.And then they will eat you, maybe topped with some tangy barbeque sauce
made out of your congealed blood sautéed in butter with some minced onion,
brown sugar, maybe a little mustard, salt and freshly-ground pepper to taste,
topped with a festive sprig of fresh parsley, all because the prices of food,
and the prices of everything else, are so high that they cannot afford to buy
regular food! Fatten up, kids!"

As I am dishing out handfuls Halloween candy to each of the
kids, I continued in Fine Mogambo Style (FMS), loudly yelling at the kids anew,
asking "And you want to know why? Huh? You want to know why you are going
to be killed and made into hamburgers? It's
because the evil Federal Reserve is creating so terrifyingly much money, and
thus creating horrifying, murderous inflation in prices. And they are doing it to
-- incredibly! -- allow the corrupt, insane federal government to give money to
literally half the population by irresponsibly deficit-spending the equivalent
of a full 10% of the Whole Freaking Economy (WFE), and, in the process, racking
up insane, suffocating amounts of painful, bankrupting debt that cannot
possibly be repaid!"

By this time, out of the corner of my eye, I can see the
concerned parents are no longer patiently waiting in the street, but are coming
up to see why I am yelling at their kids and the other trick-or-treaters,
making them scream and cry, but still wanting for me to give them more candy,
the greedy little beggars.

The parents call out anxiously "Angela! Are you okay?
Why are you crying?", and "Jimmy, get away from the creepy, horrible
man!"

Immediately sensing that they are nervous and distressed, I
soothingly tell the concernedparents
"Of course they are okay, you lowlife morons! They are crying in fear
because they have seen the ugly future, a destroyed, nasty, barbaric world
after an insane Federal Reserve has created untold more trillions and trillions
of dollars in new money and debt, until the buying power of the massively over-produced
dollars falls to zero. And it scares them, as it should!"

Keeping the kids carefully herded into a tight group standing
between me and their strangely-and-suddenly angry parents descending upon me, I
quickly explained "I was just trying to help your children learn to buy
gold, silver and oil to capitalize on the inflationary horror destined to
devour them, since you seem to be too stupid to understand any of it!"

Then, surprisingly, one of them yells out "If you are
so smart, how come the velocity of money is going down?"Well, I gotta tell ya, I was pretty
astonished at this odd turn of events!

And so was everyone else, apparently, as suddenly everything
got very quiet, and everyone was looking right at me.

Well, of course, the reason is that the velocity of money is
merely a plug figure, equal to GDP divided by the money supply. This comes from
the famous Fisher equation where the Price of things sold, times Quantity of
things sold, equals Money supply times the Velocity of money (turnover in
financing transactions), or, more familiarly, PQ = MV.

Since PQ is essentially the Gross Domestic Product (GDP),
the idle calculation of velocity of money is made simplistically easy by simply
dividing the money supply into GDP, which are two readily-available figures, thus
perhaps explaining its popularity.

In general, when the denominator (Money supply) goes up
faster than the numerator (Price times Quantity sold, or GDP), the calculation
of Velocity will, by simple arithmetic, go down, and when things are
vice-versa, vice-versa.

In this case, though, the question seemed apt, though the Halloween
setting seemed odd, as the Money supply is undeniably rising rapidly, making
Velocity go down, but Prices are obviously rising, making Velocity go up, and
Quantity sold is disastrously going down, making Velocity go down.

But remember: Velocity is the result of three variables, and
velocity could be rising (a supposedly good sign) although Prices were
exploding upward (a bad economic sign) and the Money supply was rising (another
bad economic sign) if Quantity sold was actually falling (a very bad economic
sign).

With all due respect to the singer Meatloaf and his immortal
song, maybe two out of three ain't bad, but not so when zero out of three is,
without a doubt, bad.

So I answered, in that strangely cryptic, monotonic, robotic
way that visitors from other planets have when addressing Earthling
carbon-units, "Velocity has fallen because the ratio of the numerator to
the denominator went down. Surrender, Earthlings. Resistance is futile."

I expected, if not a suddenly-enlightened crowd cheering and
shouting my praises for my illuminating insight in interpreting PQ=MV, at least
a brief smattering of polite applause for my pithy profundity.

Well, there MAY have been some of that, but it was drowned
out by shouts of "You're crazy!" and "Quit trying to look up my
wife's skirt!" and "Burn him and take all his candy!"

At least, I THINK that is what they were saying, because by
that time I have scurried off, safe and sound inside the Fabulous, Fully-Fortified
Mogambo Bunker (FFFMB), and all I hear is muffled voices through the thick
walls.

In the sudden silent solitude, I realized that the kids got
the candy treat, referred to in "Trick or Treat,", but their moron
parents got the trick, in that I did not get a chance to tell them to
frantically buy gold, silver and oil to prevent their looming and dooming
calamity.

But, then again, they would not have listened.They never do.That's the way it is with most Earthlings.

About Me

The Mogambo Guru
Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning , and other fine publications. For podcasts featuring the Mogambo.